Types of Health Insurance
The main kinds of health cover — indemnity and benefit-based, individual, family floater, group, top-up and super top-up — how each one pays, and what portability carries across when a policyholder changes insurer.
Two ways a policy can pay
Health insurance is a contract under which the insurer does one of two things. Under an indemnity cover it reimburses medical expenses caused by illness, injury or surgery, up to the sum insured. Under a benefit-based cover it pays a pre-agreed amount when a defined event occurs, whatever the hospital bill.
Critical illness cover is the usual example of the second kind. It pays a fixed lump sum on diagnosis of a listed illness that meets the policy's definition, usually after a short survival period. Which illnesses are listed, how each is defined and how long the survival period is are set by each policy.
Individual, family floater and group
An individual policy gives each insured person a separate sum insured. A family floater covers the whole family under one shared sum insured: any member can use it, but the family's total claims in a year cannot exceed that one amount. A large claim by one member therefore leaves less for the others.
Group health insurance is cover arranged by an employer for its employees as a workplace benefit. Group policies commonly waive some waiting periods, depending on the group's terms. The cover generally ends when the employee leaves the employer.
Top-up and super top-up
Both plans sit above a deductible, an amount borne by a base policy or by the policyholder, and pay only the part of a claim beyond it. They differ in how the deductible is counted. A top-up applies it to each single claim, so it pays only when one claim by itself exceeds the deductible. A super top-up applies it to the total of all claims in the policy year, so several smaller claims can together cross it.
A family floater as the base policy with a super top-up above it is a commonly used way to reach a higher sum insured at relatively low cost. Whether it suits a particular family depends on their circumstances and on the super top-up's own deductible and waiting periods.
Portability
IRDAI gives policyholders the right to port a health policy to another insurer at renewal. Credit for waiting periods already served is carried forward, to the extent of the sum insured being ported, so those periods do not have to be served again for that amount.
The rules in the Master Circular on Health Insurance Business of 29 May 2024 are written for indemnity policies. The existing insurer must supply the policyholder's data within 72 hours and the new insurer must decide within 5 days.
Rules at a glance
One floater, two claims
Illustration: the Nair family of four in Thrissur has a family floater of ₹10,00,000, assumed to have no restoration benefit. In June the father's heart procedure produces an admissible claim of ₹6,50,000. Only ₹10,00,000 − ₹6,50,000 = ₹3,50,000 now remains for all four members until the policy year ends.
The same year under a top-up and a super top-up
- Assumptions, for arithmetic only: a deductible of ₹3,00,000 in both plans; two admissible claims in one policy year, of ₹2,00,000 and ₹2,50,000; no co-pay or sub-limits.
- Top-up: test each claim separately. ₹2,00,000 is below ₹3,00,000 and ₹2,50,000 is below ₹3,00,000, so the top-up pays nothing.
- Super top-up: add the year's claims. ₹2,00,000 + ₹2,50,000 = ₹4,50,000.
- Amount above the deductible = ₹4,50,000 − ₹3,00,000 = ₹1,50,000, which the super top-up pays.
Result. With these two claims the top-up pays nil and the super top-up pays ₹1,50,000.
Key points
- Indemnity cover reimburses actual medical expenses; benefit-based cover pays a pre-agreed amount on a defined event.
- A family floater has one sum insured shared by the whole family for the year.
- A top-up pays when a single claim exceeds the deductible; a super top-up when the year's total claims do.
- Group cover is arranged by an employer and generally ends when the employee leaves.
- On portability, waiting-period credit carries forward to the extent of the sum insured ported.
Common misunderstandings
- A family floater does not give each member the full sum insured: the one amount is shared, so a big claim reduces what is left for everyone.
- A top-up does not add up claims: two claims that each fall below the deductible trigger nothing, even if together they exceed it.
- Portability does not carry unlimited credit: waiting-period credit applies only up to the sum insured being ported.
Questions people ask
Does a critical illness policy pay the hospital bill?
No. It pays the fixed lump sum stated in the policy on diagnosis of a listed illness that meets the policy definition, irrespective of the actual hospital expenses.
Who bears the deductible under a super top-up?
A base policy or the policyholder. The super top-up pays only the part of the year's total claims above the deductible, up to its own sum insured.
Are waiting periods lost on moving to another insurer?
No. On porting at renewal, credit for waiting periods already served carries forward to the extent of the sum insured ported.
What this lesson relies on
- IRDAI (Insurance Products) Regulations, 2024
- IRDAI Master Circular on Health Insurance Business (29 May 2024) — portability
This lesson was reviewed independently against these sources on 8 October 2026. Rules change: check the current regulation, scheme document or policy wording before relying on any figure. This is education, not advice.